We hear often of the U.S. trade deficit with countries like China and Japan, with the implication that nations trade with each other. Technically, nations do not trade with each other. Consumers and businesses in the U.S. buy products from businesses in Japan and China and other countries, and consumers and businesses in other countries buy U.S. products from American businesses. This is not just a technical issue, but a practical one, because we often lose sight of the importance of international trade when we talk about the “U.S. having a trade deficit with China,” or hear about “an imbalance of trade,” as if “countries” trade with each other. The “unit of analyis” in international trade is NOT countries, but individual consumers and individual businesses for the most part.
I think it would be more accurate to say, and it would increase our understand of trade, if we said “Conumsers and businesses in the U.S. purchased $75 billion more goods and services from Japanese businesses in 2006, than consumers and businesses in Japan purchased from U.S. businesses. On the other hand, Japanese investors invested $75 billion more in the U.S. economy than U.S. investors invested in Japan during 2006.”
For example, if you take your family on vacation to the Bahamas or Europe or Canada, I don’t think you would think of that action as contributing to the “trade deficit” or the “trade imbalance,” even though your vacation would technically increase the “trade deficit of the U.S.” And yet it is millions of individual transactions like your European vacation that make up the “trade deficit of the U.S.”
So keep in mind that individuals buy and sell and trade globally, not countries.
Venezuelan President Hugo Chávez on Monday announced plans to nationalize the country’s electrical and telecommunications companies, take control of the once-independent Central Bank and seek special constitutional powers permitting him to pass economic laws by decree.
“All that was privatized, let it be nationalized,” said Chavez.
Hasn’t that already been tried before and abandoned in places like the Soviet Union?
Q: The minimum wage has strong support from many policiticans. So when they vote to raise it next time, why not also vote to index the minimum wage to the rate of inflation, like Social Security payments, and be done with it? Forever.
A: Indexing the minimum wage would end the political payoff from raising it again sometime in the future? Forever.
From a recent report from the Joint Economic Committee of Congress:
According to a key Census Bureau measure, income inequality has been essentially unchanged since 2001. In response to a request by the staff of the Joint Economic Committee, a statistical test performed by the Census Bureau yesterday confirms that no statistically significant change in the inequality measure occurred between 2001 and 2005, the last year for which data are available.
In the bottom fifth of households, 58.7 percent have no earners, whereas in the top fifth 76.3 percent of households have two or more earners. There is often good reason not to work, such as retirement or disability, but obviously households without earners will lack earnings.
Inequality in consumption is much less than inequality in income. For example, the level of consumption in the bottom fifth is nearly twice that of income, indicating that income is not necessarily the best measure of economic well-being.
Civil rights used to be about treating everyone the same. But today some people are so used to special treatment that equal treatment is considered to be discrimination.
~Economist Thomas Sowell
From Don Boudreaux at Cafe Hayek: “Arguing that trade has “losers” is simply another way of saying that competition has “losers.” Anyone who questions the merits of trade because they can identify persons harmed by it is someone who questions the merits of competition.
Compared to the number of people who think it wise and sensible when the pundit suggests that trade be limited as a means of fostering prosperity, fewer people would think it wise and sensible if this pundit instead suggested, explicitly, that competition be limited as a means of fostering prosperity.”
MP: I would argue that you could substitute “progress” or “advances in technology,” for “competition” above, and Don’s argument would be the same. Progress and technology have losers, i.e. thousands of jobs are lost because of progress and technology. Would anybody ever propose legislation to prevent, elminate or stall progress and technology because they eliminate some jobs? Probably not. Why then support tariffs and protectionism to prevent the loss of some jobs?
From today’s monthly budget report, from the Congressional Budget Office, on federal tax receipts through December, the first quarter of fiscal year 2007, compared to the first quarter of fiscal year 2006:
Individual income tax receipts increased by 9% to $251 billion.
Corporate income tax receipts increased by 22% to $99 billion.
Overall tax receipts increased by 8.1% to $573 billion.
At that rate, federal tax receipts this fiscal year would hit $2.3 trillion by next September, and set an all-time historical record for tax revenue collected.
Q: What tax cut?
“With corn supplies tightening fast, rising prices will hit not only products made directly from corn such as breakfast cereals, but those from animals who rely on corn for their sustenance – including pork, poultry, beef, milk, eggs and cheese.
The automotive demand for corn-based ethanol is nearly insatiable. Filling a 25-gallon tank on one mid-size vehicle consumes enough grain to feed an Egyptian peasant for a full-year. Yet converting the entire U.S. grain harvest – corn, rice, wheat, barley and oats – to ethanol would supply only 16 percent of America’s motoring fuel.
What’s worse, ethanol is not even an effective substitute for gasoline – requiring huge federal subsidies to compete at the pump and delivering only 70 percent the energy of an equivalent amount of gas.”
From the article “Ethanol’s insatiable appetite for corn could trigger food crisis.”
Perhaps the ethanol scam is like burning wood in a fireplace – it makes us feel good, but results in a net energy loss, making us worse off overall.
From today’s NY Times, an article in the Business Section about price discrimination for electricity, which fluctuate hourly based on differences in demand:
“Just as cellphone customers delay personal calls until they become free at night and on weekends, and just as millions of people fly at less popular times because air fares are lower, people who know the price of electricity at any given moment can cut back when prices are high and use more when prices are low.
Most people are not aware that electricity prices fluctuate widely throughout the day, let alone exactly how much they pay at the moment they flip a switch. But participants in a new program can check a Web site that tells them, hour by hour, how much their electricity costs; they get e-mail alerts when the price is set to rise above 20 cents a kilowatt-hour.”
Pizza Patron, the premier Latino pizza brand, announced today that it would be accepting Mexican pesos as well as U.S. currency at each of its 59 locations nationwide. The “dual currency” program is being run on a trial basis until the end of Febuary.
Read more here.